The investment clock

oldman,

Highly leveraged asset owners are most vulnerable to downturns during a recession:

1. Chinese coal billionaire drowning under $5bn pile of debt — 17 Dec 2013

2. Eike Batista's spectacular fall from billionaire grace — 30 Oct 2013

3. Billionaire Sheldon Adelson almost bankrupted with debts in 2009

4. An example of failed real-estate investments at the height of the property boom in 1997: Kenny Bee — 17 July 2002

"Most of the companies or individuals who fell into immediate and serious trouble were those with heavy debt. In the pre-crisis period, a number of businessmen had taken huge loans to acquire properties or listed companies."

Malaysian Chinese Business: Who Survived the Crisis? — Oct 2003

The Casualties: Many of the first category can be found among companies that filed for protection under Section 176 of the Companies Act by mid-July 1998. Most notable was Time Engineering, a subsidiary of Renong, the largest Malay-owned conglomerate in Malaysia. The Chinese-owned or controlled companies that filed for protection include shipbuilder Westmont Industries, financial services firm MBf, appliance maker Kuala Lumpur Industries, property developer Wembley Industries, and stockbroker Uniphoenix. Other firms had their debts taken over by Danaharta Nasional. As of December 2000, 32 out of 76 companies placed under Danaharta special administrators were identifiably Chinese-owned. Several of these had been high profile in the pre-crisis period: Malaysia Electric Corporation, Jupiter Securities, Sin Heng Chan (Malaya), Instantgreen Corporation, Seng Hup Corporation, Timbermaster Industries, Woo Hing Brothers (Malaya), Bescorp Industries, Sri Hartamas, Rahman Hydraulic, and Kuala Lumpur Industries Holdings.

Most of the companies or individuals who fell into immediate and serious trouble were those with heavy debt. In the pre-crisis period, a number of businessmen had taken huge loans to acquire properties or listed companies. Pledging shares of their own firms, some of which had price-earnings (PE) ratios of 18, to acquire companies with PE ratios of 6, seemed an intelligent way to expand and diversify. In a period when loans were easy to obtain, some investors then used the acquired shares to make further acquisitions. These corporate raiders bought up sizeable numbers of shares of targeted companies with the aim of driving up share prices before disposing of them at a huge profit.

Two businessmen known for ambitious acquisitions and takeovers who later came to grief are Soh Chee Wen and Joseph Chong Chek Ah. Soh began with the takeover of a company called Autoways Holdings. He subsequently acquired, among others, the stockbrokerage firms Uniphoenix and Halim Securities and the manufacturer Perstima (involved in the production and sale of electrolytic tin plate for the canning industry), which he later sold off. But Soh became heavily indebted and his companies were eventually placed under Danaharta Nasional’s special administrator.

Like the businesses acquired by Soh Chee Wen, some of those bought by Joseph Chong were considered healthy, such as the publicly-listed Wing Tiek Holdings and Westmont Industries. Other of Chong’s companies included Westmont Land, later re-named Techno Asia Holdings, and Prima Mould Manufacturing. Chong took over Sabah Shipyard and proceeded to acquire the National Steel Corporation of the Philippines. But in mid-1997, talk began of major financial problems at Westmont Industries. According to a report in The Edge (16 November 1998), an investigative audit revised Westmont’s accounts to indicate a huge loss instead of profits for the 1996 financial year. The crisis greatly aggravated Chong’s problems. As of December 1997, Westmont’s losses amounted to RM651.4 million and liabilities totaled RM883.7 million, including short-term and other debt of more than RM400 million. Westmont became the first of 30 publicly-listed companies to file for protection under Section 176. Chong’s Wing Tiek Holdings, which had accumulated losses of RM200 million, was also forced to restructure. Chong is no longer associated with the two companies.

Perhaps the most spectacular corporate fall due in part to overexpansion and the crisis was that of Lim Thian Kiat (better known as T.K. Lim) of Multi-Purpose Holdings. Multi-Purpose Holdings was once linked to the Malaysian Chinese Association (MCA), a senior member of the ruling Barisan Nasional (BN) coalition. Lim’s family had used its own company, Kamunting, to gain control of MPH during the 1986 recession, however, after the firm went on a massive acquisition binge and subsequently suffered heavy losses. Lim belonged to the new generation of young and ambitious corporate players, and under his control Multi-Purpose Holdings expanded further. Lim also had political connections and was reportedly close to Anwar Ibrahim, Malaysia’s Deputy Prime Minister between 1993 and 1998. The heavily-diversified Multi-Purpose Holdings group included Multi-Purpose Bank, Malayan Plantations, property developer Bandar Raya Developments, and the gaming firm Magnum Corporation. By 1997, Multi-Purpose Holdings had incurred debts amounting to RM2.2 billion, and Lim’s Hong Kong investments were also said to have suffered heavily from falling property values.

A follow up article from the same author: 

It's not a bubble until it's officially denied, Singapore edition

Dr Doom's prediction.... Singapore is one of the 17 countries....

An alarming map of the 17 countries with possible housing bubbles

oldman,

水可载舟，亦可覆舟。
(If something is used correctly, it will be beneficial. If used incorrectly, it will cause more damage.) 

The result of artificially suppressing interest rates in the long-term will be worse than it otherwise would have been.
 
In the early 80's, the savings account interest rate offered by POSB was @ 8.5%.

Interest rates should rise to begin the “normalisation process” - IEA — 13 Jan 2014

Interest rate normalization — 12 Sep 2013

oldman,

It's amazing that you could read my mind again!   Yes, the root cause is long-term extremely low interest rate!